Meetings Law: Clause & Effect

The force majeure clause is a critical one, but of no use in a sudden economic downturn, during which holding your meeting is not "impossible or illegal," but there will be a huge attendance shortfall.

The property has no incentive to help unless it anticipates that being lenient will result in future business. But there is a way to contractually guard against an economic downturn and require the hotel to renegotiate. Consider fashioning a separate clause to cover economic downturns. For example:

"Between the date this agreement is executed and the date of the meeting, should there be an economic downturn resulting in more than an X percent decline in the Consumer Price Index, the parties agree to negotiate in good faith to adjust the room block, meeting room space, and food and beverage minimum to more reasonable levels to account for the downturn."

There are several different Consumer Price Index figures, so you need to be specific as to what index to use. The hotel may prefer some other economic benchmark, which is fine as long as it is neutral and reliable. Make note of what the benchmark is when the contract is signed and again in the months and weeks leading up to the event.

The trick is selling this to the hotel's conference manager, and agreeing on terms. But that shouldn't be a hard sell.

In strong economic times you can argue that the clause is not likely to come into play. And in a weak economy you can argue that the economy is not likely to weaken sufficiently further to trigger the clause, and even if it does, you need the clause as a safety net.

A reasonable hotel manager should realize that a severe economic downturn is essentially another type of force majeure event. The good news for the hotel is that the clause allows a reduction in costs, but not a cancellation, so there is still profit to be made.

Ben Tesdahl, Esq., is an attorney concentrating on nonprofit, corporate, tax and contract law, including meetings and conventions law. He is with the law firm Powers, Pyles, Sutter & Verville, P.C. in Washington, D.C.

Originally published Jan. 1, 2010

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